Remember never forget the power of greed and fear, and the propensity for investors wanting to own stocks (taking long-side) and fund managers chasing performance as we saw today especially if they think the bull-train is pulling away they will want to hop on board.  Please, remember when in doubt as to market conditions/direction CASH is always king (or queen depending on your gender J ) please trade cautiously and be quick to protect your profits. I’m guessing that this the days ahead we will become embroiled in a major bull-bear battle as we head into the end of earnings-season!

Its a start to another week and we have to ask will this Monday be a Mutual-fund or Merger Monday wherein we see another attempt at a significant gap-up/run by the early market futures players.....and whether we should expect another bullish tone for the open due to news that is hyped or an external event hitting the wires on Sunday or Monday morning; we are still very oversold on the 30/60/120/180/240 and daily charts so even we ended in the GREEN on Friday after making relative new-lows this is a near-term bullish signal...so we should not discount such an attempt by the futures player to orchestrate a huge gap-up….the questions is will it be a GAP-Run or GAP/Crap….. as the play of late has been to sell into gaps or rips....this time I think that all dips should be bought as we could have a multi-day relief rally setting up....I would not be surprised if they  attempt to press a Gap/up and then a run...the markets could get a boost (on any dollar reversal or weakness after last weeks ramp) as if we see a retreat in the dollars recent relative strength commodity classes (Gold, Silver, Copper, and other metals and basic materials along with food stuffs and crude products and stocks could reverse the recent bearishness and stage a relief rally, with would add fuel to any stock market advance!  So we will need to keep our eye on the dollar (dollar strength = market malaise and possible selling conversely dollar weakness = market optimism at least for commodities and we could see selective buying in these asset classes) again so this will be an important indicator to watch, we will need to watch crude as well as its been in a down-trend (we got a pop late Friday) along with the Asian markets closely....I am also watching the Russell-2000 for directional clues as speculative money is again finding its way into this sector!    Please take on LONG positions very carefully as well as SHORTS  at these levels as the risk to at these critical levels is looming like a proverbial sword.

Strap-yourselves, as it is sure to be another wild another wild rollercoaster ride!! especially during as this week is the heart of earnings reports!   The question is do you want a ticket to embark on this amusement ride...I expect volatility will be quite high and we will have many bouts of pops and drops...and a trader or investor that is not nimble or willing to correct with the market-flows and ebbs could lose a few fingers or become a proverbial bag-holder!      Currently the trend is down, and the selling has been on significant volume...but that could quickly change as the dip buyers may emerge with the onset of a short-squeeze, or the bad-news bears could taste blood and grind the bulls into chuck....so until key levels are breeched to one side ort he other I'm recommending to my passive folks to remain on hold (sit on your hands...(see technical section below)....remember these quant-programs are great at developing head-fakes!    

A potential market positive, as Washington could be on hold for a few days as will be their rhetoric and antics: the biggest winter storm in close to 90 years walloped the Mid-Atlantic States Saturday, shutting down our nation’s capital and burying the region in snow and power outages, flight cancellations and miserable driving conditions (those poor SOB’s its common place up here in Maine)….Some two feet of snow have already fallen in some areas by mid-afternoon, and it continued to pile up across northern Virginia, Maryland, Delaware, New York, and southern New Jersey. Below-freezing temperatures were being reported as far south as Richmond, Va., and could stretch to Columbia, S.C., overnight.

The contagion that might not go away......The euro zone's top finance officials sought on Saturday to ease growing contagions about a potential nasty budget crisis that has started to roil the financial markets (likely due to significant credit default exposure) and the potential default has raised questions about the future of the single currency (*Euro). After a 2-day meeting of finance ministers and central bankers from the G7 industrialized nations, European Central Bank President Jean-Claude Trichet said he was confident that Greece, which has been hit by a mega budget deficit crisis, would meet tough new belt-tightening. 

Trichet’s comments suggest Europe will do something to help Greece; but what it will be and in what form is the $64,000 question; that begs to be answered. They have some structure in place like the European Investment Bank that can provide support, but structurally they are at a political cross-roads; the problem is that in European Union there is not a single Treasury secretary that can coordinate the intervention, and its likely that the citizens of the respective bailout nations will be more than just a little upset.  

Now the question that remains…will the global markets (and ours) be reassured by these somewhat lackluster comments? I’m not sure this is what the markets needs or wanted….I’m guessing that they were in search of stronger assurances with substance! My hunch is that Europe was caught in the middle has and could not even come close to committing with any solid assurances as they have a national strike looming and the populace is more than agitated; and these contagions are not going to go away overnight. I was perplexed at Trichet's mundane comments that he is confident Greece will meet their deficit target, as in my opinion there is little hope of such an outcome anytime in the near-future a Greece has to take these reforms seriously. 

From Greece to Spain, and now Portugal, a government debt crisis is spreading along the Euro zone’s periphery, increasing concern over the stability of the monetary union. Following Greece, Spain and Portugal proved to be the next weakest links in the euro zone economy. They have become the new focus of market anxiety due to the problem of their soaring budget deficits and public debts (when will the US be also be brought out and be put on a similar chopping block).  For Greece and other heavily-indebted Euro zone countries, there is a dilemma when governments are forced to take austere measures to cut deficits and public debts. As usually, governments have to cut public spending drastically and raise taxes to reduce deficits; and the economic recovery remains very fragile right now so any withdrawal of public spending could easily lead to a double dip; not to mention that any such moves such as the responses needed are often very unpopular. When the unemployment rate is at a record high in Europe, people are very dissatisfied with their governments; and when this happens they (unlike Americans) stand up and protect/strike and unseat their governments.

The coming week is light on significant economic data releases, which will likely give traders time to review the big data points of the past two weeks, as the indexes hang on to some critical levels (or will they)….*(we do bet the B-52 Bernanke testimony on Wednesday [He’s testifying to the House Financial Services committee on how he plans to end the Fed's current monetary big-bank bailout programs] . Late Friday there was a rumor that the IMF might announce a massive aid package for Greece over the weekend and the reaction in the market was immediate…and the shorts were stampeded over as they tried to make their way to the exits. Even if the rumor was false and likely promoted by prop-trading desks of several major program traders and those with heavy short positions could not afford to tempt fate that the rumor was just that, and they as I suggested could not afford the contagion of holding Short over the weekend as if a deal was announced the markets could have gapped higher at the open on Monday and these same shorts would have been hurt very badly. Once the reversal began it was a made dash toward the exits as stops were hit and many shorts watched in complete disbelief as the rebound took the markets from deep in the red….to finish slightly in the green.  Friday's session was a fitting close to a week characterized by contrasting and conflicting views about the pro forma economic recovery coming from macroeconomic reports and uncertainties (market hates uncertainty) coming both from across the pond and from Washington. Markets initially reacted negatively to the January nonfarm payrolls report, selling off moderately in the face of a mere 20,000 job losses (but the contagion was far worse underneath the hyped headlines), even the slightly better unemployment rate of 9.7% was extremely misleading…. The unemployment rate dropped from 10.0% in December, but only because 843,000 American workers, being extremely discouraged with not finding work after many months were dropped off the active job seeker rolls and into the discouraged worker category [the uncountables]. Meaning that they have given up actively looking work, as none exists; this new reduction in the overall active workforce helped to reduce the unemployment numbers simply because there are fewer workers actively looking. This is a counterfeit method for quoting unemployment in my opinion. The unemployment rate of 9.7% equates to 14,850,000 unemployed workers. However, the U6 unemployment, which includes those in the discouraged category and those who are working a part time job because they can't find full time work shows that we have 25,810,00 people unemployed or under-employed hence why the economy is struggling.

The BLS announced in October they were going to revise jobs lower in February by ~850,000 due to a major glitch in the birth-death model something that I have been writing about for many years. The B/D model has consistently assumed that in the long run jobs are always created and seldom destroyed; a premise that I have never shared. The nasty contraction in jobs resulting from the credit crisis debacle has literally killed tens of  thousands of small businesses which historically have account for 65% of new jobs created (hell even I closed down 2-companies and was forced to layoff 31). The BLS also announced that they will post another revision in February 2011 (and this one could be ugly) as it’s expected that they could announce another 1.0-1.2 million more jobs lost. By prorating and backdating these losses over two years they are trying to avoid the headlines, that are associated with a mass cover-up as they may be called on the carpet that they purposely under estimated jobs lost over the past few years by as much as 2-2.4 million jobs. If you want to avoid a little despair venture this slide show from Bloomberg on this pending revision

We enter the week (pre-options-X week, where we see historic roll-outs) with the near-term charts quite over-sold-conditions, and this week I hold a tad bit of hope for the bulls for a technical rebound!

As I stated on Friday in our real-time trading room…. All the indexes are at/near or have broken key levels of support and appear headed for a decent correction. At this point the bulls need to be concerned with is whether it is a 10% correction or worse. With this much cautionary revenue guidance and lackluster forward guidance I have to believe that institutional investors and the so called smart-money players are worried that there could be a double dip ahead (as real demand is missing from earnings, as many firms are still making earnings by slashing costs) and moving to the side lines (many may park the money in short-term bonds) so they can position themselves to profit from a potential debt default by Greece, or another major market contagion (bad bond auction) or geopolitical event. That would mean moving to dollar-assets instead of stocks or the once hot commodities. As I forecasted we have seen a very-decent commodity selling-event since early January and as I predicted the dollar has risen to new 6-month highs this past week; the rotational trade is underway and I don't think it is done yet as many firms could be seeing a way of redemptions in the days and weeks ahead!

On a technical basis we are entering the danger-zone; perhaps most importantly as I have previously mentioned and written about are the weekly charts in my technical section below which depict that the MACD oscillator, a very telling indicator along with the full stochastics has turned down from historically very overbought conditions and if the Indexes do not rebound strongly this week we could see a very-strong sell-signal trigger which could be the start of a water-shed selling event….the near-term charts [daily, 240/180/120/] are quite oversold (doesn’t mean that they can not remain in such a condition for an extended period of time) and we must be on the alert for a manipulated monster short squeeze as the prop and programs traders are renowned for staging such events when the street believes that critical support levels are broken and the only path is down! As in a nut shell several of the major indexes have broken down through their 100-Dsma…I have seen the herd of newbie shorts get crushed in stampedes when the shorts are squeezed many time (been there myself years ago)  

Nevertheless in the past decade a weekly (or better yet a monthly roll-over of the MACD from such overbought levels has occurred infrequently and each time we have seen very powerful selling events; In the past several months I’ve been accused of being a very pessimistic gloom and doomer. At times my prediction and forecasts have to many sounded exceptionally and overly pessimistic and sometime a few readers even asked what I had been smoking; of late many publishers of stock-market-timers chose not publish some of mt recent works, but that hasn’t been a problem for my subscribers; the calls were based on reasoned logic sound technicals and fundamentals and my exhaustive-top call emerged as expected….but now most of you are now reiterating that this move is now behind us…its in the past now what developments do I see happening in the days and weeks ahead.  The most asked question has been {How far will the indexes drop? Where can we safely look to buy the dips for a rebound? And what will be the impact on the economy be after such a drop?

I'm still bearish right non on a longer term basis (but on a near-term basis I'm of the belief that we could see a pre-options X relief rally especially after please review the entire technical sections below) for the intermediate and longer-term periods...The near-term charts as well as the daily-charts are oversold, and a potential bounce is not out of the question.

On Friday we could have formed a potential reversal on Friday…the candles that were formed in the last 90-120 minutes of trading were either key-reversals or a hammer candle; which is often a bullish reversal indicator that forms after a significant decline, we will need to see confirmation of a trend reversal on Monday…with either a gap-up or a slight pull-back then a ramp job (we have seen mutual-fund-Monday ramps in 34 out of 41 Monday’s now, where futures players premarket some how manipulate a magical gap-up and then they attempt to press the position forward….we need to be on the look out for such a development!

After months and months of an artificial rally, where 80% of the gains in the indexes have come on 34 Mondays, of blatant upward manipulation the indexes now look poised to reverse.  I believe wholeheartedly that we have either already posted or we are about to post the third major top in the various indexes in this decade; and maybe it happened this past week or maybe we will start the mega-roll-over in the next several weeks as earnings season comes to a close or at my next major inflection turn date that is forecasted to fall in February 8^th to the 11^th from my vantage point the major key at this juncture is not to attempt to pick the proverbial so called exact top….this can be a foolish endeavor as the level of market manipulation is at historic highs as the Fed and treasury and major-lecherous banks/bankers who are a primary-responsible party to the major economic implosion of the housing-sector and debt-markets.